Passengers escaped a hike in rail fares proposed by the finance ministry after a last-minute intervention by Prime Minister Narendra Modi ahead of the rail budget, sources said on Tuesday.

Passengers escaped a hike in rail fares proposed by the finance ministry after a last-minute intervention by Prime Minister Narendra Modi ahead of the rail budget, sources said on Tuesday.

Railway minister Suresh Prabhu was said to have been under pressure from the finance ministry to incorporate a 5% across-the-board passenger fare hike to raise Rs. 5,000 crore for the cash-strapped public transporter.

Days before he presented his maiden rail budget, Prabhu met Modi, who overruled the finance ministry and asked the 61-year-old railway minister to go ahead with the ‘no hike’ proposal, sources said.

Prabhu, however, imposed a 3% hike in freight rates -- expected to fetch Rs. 4,000 crore -- as he shunned the populism of the past to deliver a reform-oriented budget that focused on modernising a creaking network and improving amenities for its 23 million passengers.

“As of now, the freight-versus-passenger distortions have not been addressed but passenger fares will get raised after the budget session, when the next round of the exercise to levy the Fuel Adjustment Component (FAC) gets implemented,” sources said. The FAC exercise – conducted twice a year since January 2013 – has been due since December last year.

In his budget speech, Prabhu said he aimed to transform the Indian Railways that made a massive Rs 26,000-crore loss in its passenger operations last year. He didn’t propose any new trains or factories but is likely to announce 40 new trains and extension of 20 more in the current session of Parliament itself.

“Prabhu adroitly avoided a discussion on favoritism shown towards – or neglect – of regions and states. But proposals received from MPs are being scrutinised by the traffic directorate," sources said.